Best Life Settlement Companies: 7 Things Seniors Should Check Before Choosing One (From Citizens Life Group)

How to evaluate the best life settlement companies: 7 questions seniors should ask before selling a life insurance policy, from Citizens Life Group.

Searches for the “best life settlement companies” have climbed as more seniors discover that an unwanted or unaffordable life insurance policy can often be sold for far more than its cash surrender value. Yet many older adults still do not know that companies in this market play very different roles, and that the role a company plays directly affects how much money a policyholder keeps.

To help seniors and the adult children assisting them, Citizens Life Group, an Orlando senior consumer-advocacy and education firm, today published a plain-language checklist of seven things to verify before choosing any life settlement company. The guide is built around evaluation criteria rather than a ranking. It does not name, rate, or rank specific companies.

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“The honest answer to ‘who are the best life settlement companies’ is that it depends less on a brand name and more on how a company is structured and who it actually represents,” said Cole Hallman, Managing Partner of Citizens Life Group. “Once a senior knows what to check, they can judge any company on the same footing the institutional buyers do.”

The seven checks below are written so each one stands on its own as a question a senior can ask out loud.

1. Confirm the company, or the broker it uses, is licensed in your state, and verify it yourself. Life settlements are regulated by state insurance departments, and 43 states plus Puerto Rico, covering roughly 90 percent of the U.S. population, license the brokers and providers who handle these transactions (source: state insurance departments; NAIC and NCOIL model acts). A reputable company will tell you exactly which license it or its broker holds, and you can confirm that license directly with your state’s department of insurance at no cost.

2. Ask who the company legally represents: you, or itself. A licensed life settlement broker represents the policy seller and, in most regulated states, owes that seller a fiduciary duty. A direct buyer, also called a provider, purchases policies for its own account. “This is the single most important distinction, and it is also the one most seniors miss,” said Jeff Hallman, Managing Director of Citizens Life Group. “A direct buyer is not doing anything wrong by buying for itself, but you should know that its job is to buy low, and that there is no one at that table whose job is to get the number up for you.”

3. Find out whether your policy is shopped to multiple buyers, or whether you get a single offer. Some companies present one take-it-or-leave-it offer. A broker-run process puts the policy in front of multiple licensed buyers who bid against each other. “Life settlement broker versus direct buyer really comes down to competition,” said Cole Hallman. “When buyers have to compete for a policy, the seller is the one who benefits, and that is why a competitive auction is the model consumer advocates tend to favor.” Independent research supports the gap: a 2013 London Business School study of more than 9,000 policies found sellers received roughly four times the surrender value through the settlement market.

4. Get every fee and commission in writing before you sign anything. Ask for a written disclosure of all commissions and fees, and how they are calculated, before you commit. Under most state life settlement statutes, brokers are compensated by commission paid from the settlement proceeds at closing, and that compensation must be disclosed. If a company cannot or will not put its compensation in writing in advance, treat that as a warning sign.

5. Make sure the process is no-pressure, and that you keep your statutory right to change your mind. Most regulated states give sellers a rescission, or cooling-off, period after a settlement closes, commonly around 15 days, during which the seller can unwind the transaction and return the money (source: state life settlement statutes; NCOIL and NAIC model acts). “No legitimate offer expires in an afternoon,” said Cole Hallman. “Urgency is a sales tactic, not a feature, and seniors should be suspicious of anyone rushing them toward a signature.”

6. Confirm the company explains your alternatives, including not selling. A life settlement is not the right answer for everyone. Depending on the situation, keeping the policy, using a portion of the death benefit while living, surrendering for cash value, or other options may serve a family better. A trustworthy company will walk through those alternatives plainly rather than steering you toward a sale.

7. Verify it is genuinely free to you, with no upfront or out-of-pocket cost. In a standard broker-run settlement, the seller pays nothing upfront and any commission comes out of the proceeds at closing, so a senior should never be asked to pay an application, evaluation, or “processing” fee to find out what a policy is worth.

Citizens Life Group publishes free educational tools that support each of these checks, including a plain-language glossary of life settlement terms, a state-by-state guide to licensing and rescission rights, a guide to how life settlement proceeds are taxed, and a foundational explainer on what a life settlement is and how it works.

According to the Life Insurance Settlement Association (LISA) annual market survey, consumers received hundreds of millions of dollars more for their policies than they would have by surrendering them to the carrier, with recent payouts averaging several times cash surrender value. “Seniors are not asking us to tell them who is number one,” said Cole Hallman. “They are asking how to tell the difference. Give them the right seven questions and they can answer that themselves.”

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